Household Well-Being And Retirement Preparedness

6/6/19 12:00 PM

Americans’ overall level of financial confidence has improved in recent years, according to the latest annual report on economic well-being from the Board of Governors of the Federal Reserve System. Specifically, three in four surveyed adults said that they are either “living comfortably” or “doing okay” at the moment, an uptick from the previous year and a marked 12 percentage point improvement from 2013 when this survey question was first asked. Observed gains in well-being appear to have largely been driven by better-educated individuals, as adults with a bachelor’s degree or higher were by far the most likely to report that they are at least doing okay financially currently.

Challenges remain for many Americans, though, as 30 percent of respondents said that their income varies to some degree from month to month, and 10 percent reported that such volatility causes them to often struggle with regular outlays. Further, an alarming 39 percent of surveyed Americans said that they could not even cover an emergency expense of just $400 without having to sell something or borrow money. With such a lack of short-term savings it should not be too surprising that a quarter of non-retired adults indicated that they currently have no old-age savings or pension whatsoever, and not even half of worker respondents over the age of 60 could report that they believe their retirement saving is “on track.” As for those Americans who did report having at least some money set aside for old age, a 401(k) plan was the most commonly cited vehicle. This tax-advantaged savings tool can be very powerful, especially if used consistently and with properly invested assets.

However, six in ten surveyed adults with self-directed retirement accounts said that they are either “not comfortable” or only “slightly comfortable” in their ability to make the right investment decisions. Fortunately, help is available by consulting with a professional financial advisor. That is evidenced by the nearly three-quarters of participants in an earlier Charles Schwab survey who said that regularly working with an advisor has enabled them to be “extremely or very confident” in their ability to make the right investment decisions for their 401(k) retirement plan. Only 44 percent of the respondents who said that they do not seek professional advice were able to report the same level of investment confidence. Working with an advisor can also provide help with more general financial planning, such as determining the optimal age to retire, and whether your current rate of saving will be able to deliver your desired standard of living in old age.